Baker, legislature need to encourage large solar installations
With about a month left before the Massachusetts General Court calls it quits for the year, Gov. Charlie Baker and state lawmakers need to reconcile their divergent clean energy plans to make sure the final product encourages more large-scale solar development.
The good news for the residential solar industry – and homeowners with panels on their roofs – is both Baker's plan and the one put forth by the state Senate increase the caps on net-metering, enabling owners of these installations to sell even more of the power they generate back onto the grid and further lower their power bills. This particularly helps residential solar companies to keep selling and installing arrays, making them more efficient and promoting best practices that drive down the soft costs of a new solar system.
For the residential cap, the Senate is a bit more aggressive than Baker, calling to lift the cap entirely while Baker wants to simply raise the 4-percent cap for private facilities and 5-percent cap for public facilities by 2 percentage points each. In this instance, Baker's more restrained approach is preferable – since the utilities do have to buy this new power for the grid, and it does add to the the state's already high electricity prices. The industry should be satisfied with either plan.
Where the Baker and Senate plans differ much more broadly, however, is how much support large installations should receive from the state, the utilities and ratepayers who don't happen to be utilizing renewable energy at their homes or businesses.
The Senate plan keeps the incentive programs largely in place, where all solar installations receive credits valued at the same amount they would buy power from the main electric grid.
Baker, on the other hand, calls for a gradual reduction in how much commercial-sized solar installations receive for the power they put onto the grid. Once the state reaches its goal of 1,600 megawatts of installed solar capacity, Baker's plan says solar systems of 25 kilowatts or larger would be paid either the wholesale rate of electricity or the basic customer rate. Either of those would reduce the amount the solar installations receive by at least half. Smaller solar arrays are not impacted in Baker's plan.
At this point, we favor the Senate approach, since these programs have made Massachusetts a national leader in solar installations, and at this stage, the industry is still not sufficiently mature to weather those kinds of reduced incentives without a major loss of momentum.
If large solar installations are paid at the lower wholesale rate, they are essentially being treated like typical power plants such as large-scale natural gas, coal or oil plants that put electricity onto the grid. If they are paid at the higher retail rate, they are being treated like just like homeowners that use renewable energy to power their facilities and then sell the excess back onto the grid.
For cities and towns that put large solar systems on closed landfills, for example, they would argue to be treated like homeowners, since they are using a significant portion of their solar power for their own purposes. However – unlike residential installations that have limited space on homeowners' property and therefore a limited amount of electricity to generate – these large municipal and commercial installations have the potential to put significantly larger amounts of power back onto the grid.
Long-term, we agree with Baker. At a certain size, and especially those at remote locations, solar arrays must be treated more like the large-scale power plants that supply electricity to the grid. The stranded costs that utilities have in hooking into these sites and flowing the power efficiently back into the system can add up to a substantial number, and that inefficiency needs to be taken into account when the utilities buy this power.
To get to this point however, the solar industry must undergo a reduction of the currently generous government and utility subsidies. Reducing the amount the solar owners are paid for the excess power seems like a good start to eventually get the industry to grid parity, where it is competing with other fuels like natural gas, coal and nuclear without overly generous public sector incentives.
But now is not the time for that, nor is 2018 when Baker's plan would likely begin lowering the amount of money commercial installations receive.
Through early October, renewable energy (solar, wind, biomass) accounted for 5 percent of all electricity generated in New England. Even when factoring in hydroelectric, which increases renewable's portion to 13 percent, compared to a country like Germany – which one day this summer got 78 percent of its power from wind, solar, biomass and hydro – and you can see how slowly Massachusetts is moving in the renewable direction compared to world leaders.
The reality now is that the solar industry isn't ready to be standing on its own or even to start moving away from a prudent dose of subsidies and incentives. Massachusetts has experienced a strong start this millennium in getting the solar industry up on its feet, but there is a very real possibility the industry would suffer some serious setbacks – a drop in demand, closing of businesses, loss of interest from national firms and the financing industry who are driving much of the frothy growth here – if its financial footing were to erode now.
The currently low prices for oil and gas present such a threat, and the state will be better off sticking to its long-term goal of increasing renewables – despite the wide swings in energy-related commodities.
Coupled with the potential loss of the federal 30 percent Investment Tax Credit at the end of 2016, a shift in how Massachusetts provides incentives would be far too risky for the industry and the state's clean energy goals. Ultimately, it is positive for the state and its energy infrastructure if more residences, businesses and municipalities have their own onsite power sources.
Baker's heart is in the right place. He is just jumping the gun.
Before it adjourns on Nov. 18, the legislature should follow the Senate's approach to commercial installations and wait until a more robust solar industry has formed to shift its business model.
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